Why Selling Google Now Is a Mistake

Before you go, we thought you'd like these...
Before you go close icon

In the following video, senior technology analyst Eric Bleeker and chief technology officer Jeremy Phillips discuss Google's most recent quarter. The company sold off yesterday to the tune of 8.4%, as cries rang out about its "shocking miss."

However, Eric says that the reaction to Google's earnings was Wall Street's quintessential overreaction. First off, the company was hit hard by foreign currency while it benefitted last quarter. That's a double whammy for the company:

  • Last quarter looked especially strong because of favorable currency conditions. That led to investors anchoring on last quarter's results and extrapolating forward to Google's having a better seasonally strong fourth quarter than it was actually capable of.
  • Google got slammed this quarter as the effects of foreign exchange moved back against it. Even with foreign exchange hedging programs in place, the company said revenues would have been $239 million higher if currency rates would have remained at the same level as the third quarter.

Throw in the fact that Google doesn't issue forward guidance, which leaves Wall Street to its own devices on guessing results, and the company was up against impossible analyst expectations.

Eric says he'd like to have Google see broader gains abroad, as international revenue has been stuck between 52% and 55% of revenue while mobile competitor Apple has seen its share of international sales exploding. That growth has been harder to come by in part because companies like Baidu and Yandex dominate their domestic markets. However, with Google at less than 20 times earnings while continuing to grow sales by 25%, Eric says investors selling after the company's last report are making a huge mistake.

The mobile revolution is unlike anything ever seen in technology. While Google's a strong player in the field, there are a series of under-the-radar companies set to explode as mobile continues taking off. The Motley Fool has just released a free report on mobile named "The Next Trillion-Dollar Revolution" that details a "hidden" component play inside mobile phones that's also absolutely dominating the exploding tech market in China. Inside the report, we not only describe why the mobile revolution will dwarf any other technology revolution seen before it, but we also name the company at the forefront of the trend. Hundreds of thousands have requested access to previous reports, but you can be among the first to access this just-released report by clicking here -- it's free.

At the time this article was published Both Eric Bleeker and Jeremy Phillips own shares of no companies listed above. The Motley Fool owns shares of Apple and Google.Motley Fool newsletter serviceshave recommended buying shares of Apple, Baidu, and Google and creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners